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Is the listing price on a short sale.......Tricky????

By Sarah Wynn

Real Estate Agent with HomeSmart International

September 26, 2009 12:28 PM

What is the logic behind listing a short sale so far below the market that the existing lender(s) will never agree to it? We've all seen and heard that lenders will agree to a sales price up to (maybe more) 20% less than market value.

But what is the point of listing a property at 40% less or even more? I'm confused.

Aren't we setting the buyers up for disappointment when the bank doesn't accept the offer? More importantly are we really doing our seller any favors by listing so low that there is no way the bank will accept the offer and their nightmare drags on another month?

I see it (offering the home at less than market value) as a tool to generate multiple offers and 'hopefully' drive the price higher than the list price. But, ultimately what happens is that you attract buyers that are looking for a deal and not necessarily looking for a home. The likelihood of that particular buyer waiting for approval of the short sale is slim to none.......because guess what....they are off making offers on similar homes and waiting for the approval on ONE.......ONLY one......will it be your listing?

If your listing is in a market saturated with short sales and foreclosures, pricing the property so far below market is definitely going to attract these deal hunters. If your short sale listing is in a market that has very few short sales and foreclosures, pricing so far below market is just a waste of time.

I have had short sale listings in hot (yeah, I said it) short sale and foreclosure markets that get closed if priced correctly. I have also had short sale listings in areas where there are very few short sales and foreclosures. The trick is to price the home to generate activity and ultimately a reasonable offer the bank will accept.....but isn't it the same in any market..... with or without so many short sales and foreclosures?

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Ron Parise

LocateHomes.com - Cape Coral, FL

I dont like it but I see the logic in generating multiple offers and perhaps a bidding war. And with any luck with the evidence of multiple offers; an offer that the bank can accept.

Kazork.com offers this logic

A Kazork Auction is used primarily by agents to market short sales. With a Kazork Auction, an agent can post the property at below market value in their local MLS with the standard disclaimer of "Subject to approval by the lender." When the final highest price is submitted, the agent is able to print out a Kazork Offer History Report and submit it along with their short sale package to the lender. This provides the lender with proof of multiple buyers and offers which substantiates fair market value for the property. This "proof" helps the Loss Mitigation Department of the lender to obtain approval for your short sale more quickly than if you were only submitting a single offer.

Sep 26, 2009 12:45 PM

michelangelo vasco

mvp realty inc. - Manhattan, NY

once you have the buyer you can sell them whatever it is they want, does not have to be one of your listing. Just like when a buyer calls on an ad and it is not what they want but now you can sell them if your any kind of a salesman.

Sep 26, 2009 12:50 PM

Lupe Soto-Realtor

Premier Realty Assoc - Los Angeles, CA

Listing, Selling Burbank, San Fernando Valley LA

when short selling condos, I use the most recent sale from the complex less 10% to set the listing price. it always works for me and short sale negotiators. lupe

Sep 26, 2009 01:35 PM

Sarah Wynn

HomeSmart International - Cave Creek, AZ

Ron,

I don't like it either, but I see it quite a bit. Thanks for the info on Kazork.

Michelangelo,

I totally agree, but not really sure what that has to do with pricing short sales.

Burbank,

That totally makes sense to me. Especially if you're in an area that isn't saturated with short sales and foreclosures.

Sep 26, 2009 01:54 PM

Anonymous

Anon - Public Blog

The disadvantage of this pricing strategy is the following:

1. it gives the buyers a false sense of value. If I tell them the property is worth 190k and the listing agent has it listed at 150k, they might think my value is off.

2. If the buyer saw a list price of 150k and ended up in a bid war to secure the contract at 175k. Can you imagine if the lender counters at 180k? Will the buyer even be motivated to pay? Would the buyer be motivated to pay extra expenses?

3. No buyer loyalty.

Here's what I do. I list it at the high end of the comps with a systematic price reduction. Once I get a strong offer (I consider cash or heavy cash down offers as strong) I then counter to what I know I can get away with from my market area and investor guidelines. For example if the offer is from a 50% down buyer at 175k and I know I can get it at 150k, then I counter the offer and have them draw it up at 150k and ask for 3% closing cost and have the seller pay for everything. So if I pull it off at 150k or even 160k, it is still below the buyer's expectation so they will gladly pay my commissions and other expenses that the short sale lender denied. It also buys their loyalty.

Sep 26, 2009 05:37 PM

Public Blogger,

I agree with the disadvantages that you've pointed out. I'm not sure I agree with having a buyer write a lower offer than they originally made.

Sep 29, 2009 12:54 AM

Is the listing price on a short sale.......Tricky????

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Sarah Wynn

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